Achieving Best Practices Through Shari’ah Compliance

AT PAK-QATAR FAMILY TAKAFUL LIMITED

P. AhmedCEO – Pak-Qatar Family Takaful Limited

Best Practices Day 2009 Sheraton Hotel, Kar 12 Nov

Agenda – Flow of the Presentation…• Three Levels of Shari’ah Compliance• Scope of Shari’ah Compliance• Shari’ah Compliance – USP or Strength?• About Pak-Qatar Family Takaful • Our Vision, Mission & Core Value• About Takaful• Our Business Model• Shari’ah Compliance at Pak-Qatar

– Framework of Shari’ah Compliance– Our Products– Employee Empowerment– Sales & Marketing– Operational Efficiency– Our Investment Strategy– Supporting Community & Environment

• Major Achievements of Pak-Qatar Family Takaful• The Conclusion

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Three Levels of Shari’ah Compliance

Product does not have any

impermissible elements

Product & support

processes of the

organization does not have

any impermissible

elements

Ensuring / promoting

moral values suggested by the Shari’ah

performed in the right

spirit

LEVEL 1 LEVEL 2 LEVEL 3

Scope of Shari’ah Compliance

• System / Process

• The implementation of the System

• Operator of the System ?

Shari’ah Compliance – USP or Strength?

• It is customary for majority of Halal businesses to sell “Shariah Compliance” as a Unique Selling Proposition. In reality, – The companies consider Shari’ah Compliance factor to be a “limitation” or

“restriction”– The customers consider Shari’ah Compliance factor to be something

“inferior” or weak and that they are actually paying the price for being a Muslim and not for the product

• However, Pak-Qatar Family’s experience about being Shari’ah

compliant is positive and is considered to be our major strength

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About Pak-Qatar Family Takaful Limited

• Pak-Qatar Family Takaful, pioneers of Family Takaful in Pakistan, was incorporated in 2006 and received license for operations by S.E.C.P in 2007

• The company is sponsored by 5 leading banks from State of Qatar and Munich-based FWU AG

• The company is part of Pak-Qatar Takaful Group comprising of Pak-Qatar General Takaful Limited as well

• We are the fastest growing Takaful company not only in Pakistan but also in the region

• We provide need-based and cost-effective Takaful solutions to Individuals (protection and savings Plans) and to Corporations

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Our Vision, Mission, & Core Value

• Vision:– Providing financial protection to everyone, through Takaful

• Mission:– Promote Takaful amongst the masses, encompassing education and awareness,

and present an image that is consistent with our ideological values– Adhere to best ethical practices in all aspects of operations while abiding

by the Shariah and the law of the land– Empower our employees by inspiring, guiding, enabling and supporting

them– Ensure our support to the community and the environment with

excellence– Ensure customer satisfaction by offering quality products and services

driven by their needs– Ensure optimum returns to the shareholders

• Core Value:– To achieve Excellence in all aspects of our business activities

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About Takaful

• Takaful is a risk-sharing mechanism. In Shari’ah risk cannot be transferred i.e. bought or sold

• It is based on the principles of brotherhood and mutual solidarity (Ta’awun)

• It is free from Riba, Gharrar & Qimar• Takaful serves as a Shari’ah compliant and ethical

alternate to conventional insurance

• Takaful is recently gaining widespread acceptance and recognition amongst Muslims and non-Muslims due to its ethical and transparent nature

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Our Business Model• Takaful Model is equitable and transparent• There are three parties in Takaful Model:

– Waqf Pool– Participant (Customer):– Operator (Takaful Company):

• There is no direct contractual relationship between Participant and the Operator

• Our relationship with the Waqf Pool is that of a Wakeel and the participant have direct relationship with the Waqf Pool

• The contributions we receive from the Participants are regarded as Amanat• Takaful Operator is remunerated through a fixed Wakala Fee . We do not

earn underwriting profits.

• The surplus is distributed amongst the participants or given in charity

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Takaful Business Model

Takaful Operator

Investment Participant

Participant

Participant

Participant

Waqf PoolRisk sharingBetween Participants

Surplus Wakalah Fee, Claims, Re-Takaful

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Framework of Shari’ah Compliance

• An independent Shari’ah Advisory Board certifies all products and business activities and processes for Shari’ah compliance

• The SAB conducts periodic Shari’ah Audits to ensure compliance

• External Shari’ah Audits are also conducted to validate the activities of Shari’ah Board

• Key Employees are provided basic knowledge of Mua’amulaat to take corrective measure at their own

• Employee at any level can blow the whistle

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Our Products

• Products are free from Riba, Gharrar & Qimar• They are transparent (separate accounting of Shareholders’

Fund and Waqf Pool)

• They are equitably priced• They are need-based and competitive

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Our Product Portfolio

• Individual Takaful:

• Group Takaful:

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Family TakafulHealth Takaful

Employee Empowerment

• Shari’ah requires employer to– Hire people who are professionally sound and good in character (Qawi ul

Ameen)– Treat employees equitably and remunerate them in timely

manner

– Treat all employees with dignity and do not hurt their self-esteem– Facilitate or fulfill the physical, intellectual, and spiritual

needs of the employees

– To provide proper training

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Employee Empowerment

• In return, employees

– Are attracted to join Pak-Qatar Family Takaful; Students

from Madressahs and Business Schools are working together for the cause of Takaful and Islamic Finance

– Show higher level of commitment – Give increased productivity– Are loyal

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Sales & Marketing• Shari’ah requires us not to give Takaful coverage to individuals and

companies involved in unethical activities. (The concept of

Itteham and Iyanat alMasia )• Ensure complete transparency and full-disclosure of all

product benefits & exclusions

– Our Marketing Collateral is easy to read and bi-lingual in content

• Give Khiyar or Options to customers for free review of product

• Provide best possible services

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Operational Efficiency• It is an inherent requirement of Takaful Model that the Company

should achieve operational efficiencies as the only source of income is Wakala Fee

• To achieve this, Pak-Qatar Family Takaful is – Using state-of-the-art Technology to gain higher processing

speed and accuracy– We have imported business system from Malaysia

(PentaTakaful) & are implementing SAP ERP solution– We are also in process of implementing Process Management

tools like Six Sigma etc

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Operational Efficiency

• Eliminating Wastage and higher productivity through committed employees are at the heart of our operational strategy

• Through our BancaTakaful platform, we issue a Takaful Policy in

less than 20 minutes

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Our Investment Strategy• Shari’ah requires us to:

– Not Invest in companies/projects whose primary business is unethical and against the common interest of the community (tobacco & alcohol manufacturers, gambling houses, pornography etc)

– Not to involve in day trading (selling something which is not in your possession)

– Not invest in speculative ventures – Only invest in companies/projects which are backed by real

assets

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Supporting Community & Environment

• Shari’ah does not allow us to get involved or undertake activities which go against the interest of the community or the environment

• We have established a “Staff Welfare Fund”• Both our company sponsors and employees have contributed to

the IDPs• We will provide “Free Takaful coverage” from the charity

fund to the deserving lot who cannot afford Takaful protection

• Through Takaful we can promote brotherhood and mutual solidarity amongst participants

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Major Achievements 2008 & 2009

Major Achievements• Industry Business Records (despite economic recession in

2008 & 2009):– Rs. 100m business in first year of operations– Rs. 140m BancaTakaful business in first month of operations

• We received an “A” minus (having Stable Outlook) rating from JCR-VIS Credit Co. while still in second year of operations

• We have Re-Takaful arrangements with some of the best Re-Takaful global companies in the world

• We are present in 14 cities having 24 branches • We have a trained sales force of 800+ strength in the market in less

than 2 years or operations• We have on board 200+ corporate clients in less than 2 years of

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Major Achievements• We were declared as the “Best Family Takaful Operator” in

Pakistan by 1st National Achiever Award (2009)

• Nominated for “Best Takaful Operator” in the world by CPI Financial, UAE (2009)

• Nominated for “Best Use of Technology” in Islamic Finance Industry by CPI Financial, UAE (2009)

• Ranked Top 4 in “Best Marketing Strategy” by World Takaful Summit, London, UK (2009)

• First company in the financial sector of Pakistan to implement SAP

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The Conclusion…

Survive, Sustain, & Succeedw/

Shari’ah Compliance

& you will Insha’allah reap benefits not only in this life but also in the hereafter provided it is done with the right Niyah

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Jazaak Allahu KhairanThank you for your patience & attentiveness

to contact:p.ahmed@pakqatar.com.pk